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Jim Carroll

Music, Life and everything else

Making (not a lot of) cash from streaming

It’s funny how certain music business stories keep on returning to the news cycle. A year ago, we wrote about the economics and politics of streaming on the back of Spotify and Lala being in the news. In recent weeks, …

Jim Carroll

jimcarroll

Wed, Apr 28, 2010, 14:11

It’s funny how certain music business stories keep on returning to the news cycle. A year ago, we wrote about the economics and politics of streaming on the back of Spotify and Lala being in the news. In recent weeks, we’ve seen a ton of acts debut their new albums as free-to-air streams. For instance, right now, you can hear new albums from LCD Soundsystem, Broken Social Scene and The Golden Filter, while The National had “High Violet” available via the New York Times up to yesterday.

But, as we have also seen demonstrated of late, there certainly isn’t a whole lot of money out there for acts who go down the streaming route. This graph shows just how difficult it is for acts and labels to earn the same level of revenue that they were once used to pocketing from flogging physical product. Billboard magazine have also been on the case in this regard.

The small cash payments on offer from streaming behemoths has led to predictable and justifiable outrage from songwriters, acts and their various lobby groups. Sam Leith had a good summing up of the situation in the Guardian the other day. He points out that Spotify and co are often pitched as the good cops by all concerned in the ongoing battle with internet piracy and online ne’er-do-wells. “If this is the best Good Cop can do, God help us all”, as he points out that a song played one million times would net its author £850. You can be sure that one million radio plays would result in a far better pay-day.

Of course – and Leith, in fairness, does refer to this – a lot comes down to the act’s own publishing contracts and situation. There is also the fact, as many analysts have argued, that the acts and labels’ cost base should be reduced in view of reduced income. This, though, takes time as large ships like labels move slowly and there are certain costs (mastering an album, for instance) which can’t be stripped out, unless you want a release which doesn’t sound great.

Yet there are some streaming services who seem to be providing a better return. We7 have been quietly climbing up the ranks in recent times, with the result that they’ve announced that their advertising revenue in March was enough to pay for both royalties to acts and meet their own running costs. Even their payouts seem above average: one million plays of a song on We7 equals a payday of between £2,000 and £4,000 depending on the deal between label and service provider.

That said, it may be premature to call for a ticker-tape parade. One decent month probably doesn’t make up for the lorry-loads of cash invested in We7 and the accumulated losses over the three years since the company began operations. Their break-even point is, I’d wager, still a long way down the line.

Moreover, for every We7 that finally sees some black figures instead of red on its balance sheet, there are dozens of others who came, set out their stall and departed with their tails between the legs. The huge amount of streaming services in the marketplace has probably caused confusion for acts and consumers and, though the big guns like Spotify and We7 seem set to survive, bad users experiences with some fly-by-night start-ups can have a lasting detrimental effect.

All of this shows that making money from recorded music means tending many gardens. Even though reported physical sales may be declining (see these UK figures from earlier in the week), it would still be a very foolish band who stopped pressing up CDs and vinyl given the money to be made from those sales compared to digital income. And it really does seem likely that we’re still a long, long way from a time when all revenue from recorded music comes from the digital sphere – if indeed that day will ever come. Flogging those CDs and records from the merch table at the back of your gig ain’t going to go out of fashion any time soon.

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